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Living with Giants; tough times for the institutional sell-side market

The institutional sell-side market has had a tough time over recent years. Concerns over economic outlook, shrinking commissions and rising costs driven by regulatory and structural change make equity broking and client facilitation ever more challenging. And while competing with the large global investment banks can appear daunting, the regional players, national champions and domestic brokers still have a few cards to play.

All banks, whether large or small, struggle with cost and complexity. Global sell-side firms want to offer their clients universal access to equity markets, but this one-stop shop strategy is economically challenging.

Increasingly, the costs of domestic exchange membership and local connectivity just don’t add up outside of the core markets of the global players, so increasingly top tier firms look to white label trading on regional markets through sponsored access and DMA.

Partnering with local counterparty banks makes sense, but only if they have the infrastructure and tools to facilitate the performance levels and scale that a tier-1 bank or execution specialist firm might demand.

This also works in reverse. Another advantage that local banks and brokers have over large international counterparts is an intrinsic understanding of their clients’ trading strategies and investment mandates through strong relationships built up over years.

For domestic asset managers who want exposure to international investments, local banks can meet this need by establishing relationships with large global brokers, feeding them orders to be executed on European, North American and Asian markets.

This ‘white labelling’ of market access and execution services are becoming increasingly prevalent across all major access classes given the trend of liquidity fragmentation and regulatory focus on best execution. However, firms who want to offer this need the right infrastructure and tools.

Rapid Addition has been working with sell-side banks and brokers in South Africa and other regional markets to implement trading platform technology that facilitates even the most demanding counterparties.

Leveraging Rapid Addition’s core messaging platform, RA Hub, for fast and easy counter-party onboarding and intelligent order message routing, our customers can reduce the time to market for establishing new trading relationships.

Layering on RA Fast Lane risk filters, our proprietary FPGA hardware acceleration solution, gives sell-side firms the capability to handle latency sensitive sponsored access and DMA clients.

Order flow can be sent directly into our customer’s risk gateway situated within the JSE co-lo facility or via the RA Net FIX order routing network for cost effective connectivity within South Africa.

The combination of Rapid Addition’s innovative trading technology solutions with the unique strengths of our customers is helping them compete and thrive in the ever more automated equity trading landscape.

If you would like to understand more about how we are working with clients to evolve their trading capabilities, and to discuss more about topics like the institutional sell-side market then please visit us on our stand at the JSE SA Trade Connect event.

About Rapid Addition

Founded in 2003 with the development of the world’s first repository-based FIX enginewe continue to innovate and lead the world of electronic trading technology with high performance FIX solutions.

 

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